The Standing Senate Committee on National Finance recently published its second interim report on the Committee’s study of the fiscal balance between different levels of government in Canada, entitled The Vertical and Municipal Fiscal Balances.

Nancy Peckford, Director of Programs at FAFIA presented to the Committee regarding FAFIA’s position on the Canada Social Transfer. FAFIA believes that federal fiscal mechanisms can be better utilized to ensure that Canada meets its equality obligations to women.

Recommendations from FAFIA included:

• Reattaching designations to federal transfers to make the purpose of the transfers clear.
• Re-establishing national standards for federal transfers as recommended by CEDAW (with the exception of Québec where, given its distinct status in the federation, it is acceptable that provincial government to play the lead role in determining the nature of and expenditures for most social services and programs)

The Cape Breton Regional Municipalities and Armine Yalnizyan of the Community Social Planning Council of Toronto also made similar points about the current lack of clarity around federal transfers, and the Canada Social Transfer, in particular.

In its report, the Senate Committee has made the following recommendation:

That the Canada Social Transfer be restructured into two separate transfers: a transfer to support post-secondary education and a transfer to support social assistance and social services.

Extract

B. THE MAJOR ISSUES

i. Accountability and Transparency

Many witnesses appearing before the Committee raised concerns about the accountability and transparency of the CST, and its allocation to the areas that it currently supports. They identified this as a weakness in the current system of intergovernmental transfers, in that taxpayers lack clarity about which order of government is responsible for any given public service; consequently, the taxpayer does not know which order of government to hold to account.

Nancy Peckford from the Canadian Feminist Alliance for International Action noted the difficulty in obtaining precise information on how CST funds are currently administered and spent, and whether or not these funds were being used to achieve national goals. The Cape Breton Regional Municipalities noted their frustration in obtaining information on federal transfers to the province of Nova Scotia to allow an analysis of the transfer of funding and to determine whether it is accomplishing its stated purposes. In their view, federal funding should not serve to exacerbate intra-regional disparities.

The Canadian Feminist Alliance for International Action supports reattaching designations to federal intergovernmental transfers to make the purpose of the transfers clear. Ms. Peckford also urged the federal government to re establish national standards for federal transfers. As she explained, when the United Nation reviewed Canada’s performance against the Convention on the Elimination of All Forms of Discrimination against Women in 2003, one of the concerns it raised was the variability in services across Canada. She felt that the introduction of national standards governing the CST would alleviate this issue. She noted that Canada tends to commit to implementing certain human rights under international conventions, as well as the Constitution and the Canadian Charter of Rights and Freedoms – such as the right to equality, liberty, security of the person and to an adequate standard of living— but does not come to terms with them in a meaningful way. In her organization’s view, these conventions require governments in Canada to ensure that social programs are adequate and consistent across jurisdictions, and meet established standards of equality.

Other witnesses endorsed restructuring the CST along the various areas that it supports. Armine Yalnizyan of the Community Social Planning Council of Toronto suggested separating the CST into components in support of post secondary education, child care, social services, social assistance, child support, and legal aid. She opined that these are discrete areas of intervention that require their own conditionality, national standards, and objectives.

While other witnesses stopped short of recommending more conditionality within the current system of federal intergovernmental transfers, many called on the federal government to focus less on jurisdictional issues and to take a greater leadership role in matters of national importance, such as housing, immigration, and the environment. This is discussed in more detail in Part II of this report (The Municipal Fiscal Balance).

As the Committee learned, the federal government has taken a different approach than what was heard from witnesses. As senior officials from the Department of Finance explained, in order to make the federal contribution to social policy areas more transparent, the federal government proposes to notionally “earmark” the CST according to provincial/territorial spending patterns. Under this approach, approximately 25 per cent of the CST will be earmarked as federal support for education, with the remainder earmarked for social programs. Officials clarified that the transfer will remain unconditional.

Senators also noted that proposed new CST funding will be subject to some as yet negotiated arrangements. Budget 2007 proposes to increase the base funding to the CST by $800 million for post-secondary education and to provide an additional $250 million through the CST to support the creation of child care spaces. According to the budget documents, these increases will take effect in the fiscal year 2008-2009, following discussions with the provinces and territories on how best to make use of those new investments and ensure appropriate reporting and accountability to Canadians.

Notwithstanding the above discussions surrounding new CST funding, witnesses and Committee members largely agreed that the federal government’s notional earmarking of the CST would fail to address their concerns. Some Committee members do not support the imposition of greater conditionality for the CST. However, members urge the federal government to work more closely with provincial and territorial governments to provide a more complete accounting of where and how CST funds are spent, and to make this information more readily available to interested Canadians. It believes that this information will assist all levels of government in designing and implementing more effective programs. As a first step towards greater accountability and transparency, it supports restructuring the CST into two separate components. As some witnesses suggested, the federal government may wish to consider further restructuring of the CST.

Recommendation: That the Canada Social Transfer be restructured into two separate transfers: a transfer to support post-secondary education and a transfer to support social assistance and social services.

To read the entire report, and all its recommendations, please visit:
The Vertical and Municipal Fiscal Balances